reveries.com - david byers

AUGUST 2001

Progressive, innovative, and dynamic. These are the words that chief marketing officer David Byers uses to describe H&R Block.

H&R Block? H&R Block the tax preparation company? The one that comes and goes like the crocuses in springtime? The H&R Block where maybe your Uncle Lou went to get his taxes done when you were a kid? In his Oldsmobile?

No, David Byers means H&R Block the financial services company. The one that last year served 19.2 million taxpayers through 10,000 offices in the U.S., Canada, Australia and the U.K., and another 1.8 million through do-it-yourself tax preparation software and online services.

David's talking about the H&R Block with the snappy new logo and a $100 million, globally integrated marketing campaign. The one that sponsored tax-free episodes of ABC-TV's "Who Wants to be a Millionaire" and is providing tax preparation services as a paid benefit to employees of Compaq, Sprint and US Airways. The one that has morphed from deciduous to evergreen by adding mortgage and investment services, as well as securities products to its portfolio.

Oh, that H&R Block.

And David Byers?

David joined Block in 1999 as chief marketing officer. Before that, he spent a number of years at FCB Worldwide in San Francisco. Before that, he was at Del Monte as a Product Manager. Before that, he was at FCB Worldwide in San Francisco.

So, David's been back and forth between the client and agency sides, and worked on a lot of big brands at FCB, including AT&T, Tricon and Disney. But now he's got a whole new mantra: progressive, innovative and dynamic. "Everything we do goes back to those three words," says David.

Ironically when he got the call from a head hunter a couple of years ago for this job at H&R Block, he was looking at dot com jobs in San Francisco. Marvels David: "Who would have thought I would have been as smart as I was to have taken this old economy job?"

What would you say is the hardest thing about changing the perception of H&R Block as just a tax preparation service?

It's an interesting issue, as with any large company that is known for doing one thing very, very well. It's always a challenge to broaden perceptions. That's something that we know is going to take a number of years and lots of communications to customers, over time, to accomplish.

The other challenge we face is contemporizing the brand. H&R Block is a brand with a rich history. But it is not a brand that has necessarily been viewed as being innovative, progressive or dynamic. We're changing that through an updating of our brand identity system and our logo. We're doing it through the introduction of a brand management system. We're doing it through partnering with other high profile brands.

We're doing it through an expansion of products and services, including online and software, that gets us into the electronic space in a very significant way. Overall, our strategy is the introduction of innovative, progressive types of products and services that will update our brand over time.

And you're doing that by increasing your marketing budgets at a moment when just about everybody else seems to be retreating.

Well, I think our business overall is probably a bit healthier than some of the other financial services companies today. We have a fairly wide number of products, and while our investment services line of business is experiencing the same problems that the rest of the market is, our tax line of business is historically pretty much recession-proof.

Building on a brand with the significant foundation and important heritage that this one has -- building on a foundation of strength -- is enormously rewarding.

With an increased marketing focus, we've also begun to identify ways of getting new customers into our business that we perhaps hadn't had before -- consumer promotion, partnerships with other companies, and new products and services, for example. That is providing a real impetus for growth in our business.

Our mortgage business is doing very well and that's clearly tied directly to interest rates. So, we may be in a bit of a different position than some of the companies, particularly in the investment services area.

How do you go about figuring how to spend H&R Block's hundred million dollar budget on marketing?

We have become much more scientific over the past two years. We have specifically and directly measured the effectiveness of a whole host of different marketing programs.

For example, we developed and introduced a new program this past year called Employer Solutions, where we offer tax and financial services as an employee benefit. We've got a number of pilot partners for Employer Solutions, including Compaq, US Airways and Sprint. It's the kind of program that allows us to gain increased penetration into a customer base and directly, specifically, measure the performance of the programs and understand the economic value associated with them.

We're able to go through the whole host of initiatives we've taken, to determine what's working and what isn't. That way, in subsequent years, we can add more of what's working and delete more of what's not.

I don't think we're in the position yet to judge the overall effectiveness of our Employer Solutions program, but it is probably the most innovative program we've got on the table. No one else that I'm aware of has come up with a program like this. It's a way for us to efficiently offer our products and services to large numbers of potential new customers.
Your marketing activities seem to favor promotions as opposed to advertising. Is that a fair assessment, and if so, why is that?

Actually, I would say that's not correct. Historically, this company hasn't done much promotion at all. This was the first year that we had really done any significant consumer promotion. It was not a core competency of the organization; it was not something we were used to doing. We had relied historically on advertising to drive consumer awareness and consumer trial.

However, we introduced the concept of consumer promotion this year with our tie-in with "Who Wants To Be A Tax-Free Millionaire?" We also introduced a new promotion called the "Double-Check Challenge." Basically, most people aren't aware that you can amend prior year returns. The idea is that H&R Block double-checks for any missing elements of prior returns that might result in the consumer getting more money back. We'll redo your return and re-file it.

Those kinds of consumer promotion concepts had not existed at H&R Block before. We invested in them this year and they appear to have been successful for us. So, given that we could prove a success, we would continue to roll those promotions out and consumer promotion could become a more critical component of our overall marketing mix in the future.

How do you evaluate your promotional partners? For example, what was the thinking behind partnering with Blockbuster, Amazon, Sprint and so forth?

First of all, we selected partners who would give us access into their customer bases, so that we could market to them on a cost effective basis. That would certainly be the case in a partner like a Blockbuster. We're also able to actually model against the specific kinds of customers that we want within that database.

Secondly, we were looking for brands that are as strong or stronger than our brand in the marketplace, and that could help us to continue to contemporize our brand over time. Certainly, partnering with the Amazons and the Disneys of the world enables us to do that.

Third, we were looking for partners who were big enough -- and with the brand strength and depth of product offering required -- to add value to our customer relationships. A Disney partnership is a great example of something that adds real breadth, depth and meaning to our customer base.

You also have a special program with the AFL-CIO.

We've been testing a program for several years with them to determine whether we can make specific offers to AFL-CIO members that are not available to the general public. The goal is to increase our penetration in that group. We rolled out that program this year because our testing in prior years had proved successful.

How about other consumer segments? How do you appeal to the Latino population, for example?

We actually just hired our first director of Hispanic marketing, who will be solely dedicated to marketing in the Latino segment across all our lines of business. It's clearly an important market for us. We are under-penetrated in that market today versus the mainstream market.

We did a whole host of testing programs this year on a grassroots, local level. We did outreach programs and we did consumer promotions. We did a van-marketing program that actually went through Latino neighborhoods and offered free products and services to help educate the Latino market about H&R Block. We've been very active in the Latino marketplace in the past twelve months.

The beauty of the agency side is that you get to work on so many different businesses over the course of your career.

Do you do anything special to appeal to kids, tweens and teens -- the younger set?

We tested two new programs this year. One is a high school program and the other is a college program. We tested various offers to those two constituencies. Because they are getting their first jobs and have their first incomes and therefore their first need for tax services -- it's a natural for us to get in on the ground floor and develop those relationships right out of the gate. We're in the process of evaluating the effectiveness of those programs right now.

How are you changing the H&R Block retail environment to work harder as a marketing medium?

We have a huge distribution system. We're the fourth largest retail network in the world, which surprises a lot of folks. Something like 95 percent of Americans are within five miles of an H&R Block location.

So we've got a lot of physical points of distribution, but that historically has not been managed as well as some other big brands. We've had differing looks, differing kinds of physical presences. Part of our new brand management system, and brand identity system, is to bring consistency to the customer experience so that each of our locations looks every bit as good -- and the same -- as the next one. It's also essential to create a customer experience in-store that consistent across all locations. That's our key initiative.

We're also continuing the upgrade of all of our stores. That was a process that began about three years ago. We hope to make significant progress on our upgrades this year so we get to the point where most of our company-owned locations have been upgraded.

How do you see the online component of your marketing strategy evolving over the next several years?

It’s fascinating. For most businesses, online tends to be a cannibalistic channel. Everyone is paranoid because their customers are leaving their stores and going online. The advantage that we've got in online from a tax services perspective is that it serves a whole different customer base that we don’t serve in our stores today. If you're in the tax mode, you're either what we call a do-it-yourselfer, or else you need help.

If you need help, you can come to us in our physical locations. If you're a do-it-yourselfer, you don't come to us because you don't perceive that you need H&R Block. So online and software offers us the opportunity to increase our penetration into the do-it-yourself customer bases that we haven't had in the past. The online component is very largely an incremental business for us, which is great news. We have experienced very low cannibalization of the physical channel by the online channel.

When you go to the client side, you're able to apply "best practices" from amongst a host of Fortune 500 companies to your new business situation.

We are developing a whole host of online products that will leverage our physical distribution network in a way that no one else really could. For instance, we've got a new product this year called PTS, or Professional Tax Service. Consumers go online and enter their basic information. That information is then transferred to a tax professional -- who could be located anywhere in the country. Our tax professional completes the return, communicates online with the customer to finalize the return, and then files it electronically.

PTS is a very cost-effective way of using a tax professional network that Block already has in place. We're leveraging the down time that some of our tax professionals have to develop a new, high-margin product for Block.

Have you also applied technology to streamline the marketing process itself through extranets and the like?

Yes, we did that for the first time this year. We created an extranet for implementing all of our local marketing. Essentially, we offered a local network system to our ten thousand locations, so that they can access all of the various marketing programs and marketing materials. They can download them, use them and modify them. It's a much more cost-efficient way for us to educate and provide service to a wide field network that needs a lot of information materials.
What's most challenging about developing H&R Block as a global brand?

Probably the key challenge is that each market has, from a tax services perspective, its own version of the IRS. They have their own timetable for when the tax process happens. So, in each country we have to modify how we develop new products and services and market ourselves in each individual country. That's the biggest challenge we face. Australia’s very different from Canada, which is very different from the U.S.

One of the more interesting things is that Australia’s tax season is on a completely different timing cycle than is the U.S. Because we're limited sometimes by the seasonality of what we can test and when we can test it, we're beginning to use Australia as a test bed for U.S. marketing activities because their tax season falls during our off-season. We can go over there and test something and determine whether it works or not. If it does, in the off-season, we can export it back to the U.S. for our on-season.

Are there any lessons that you've learned about running a financial services business over the last couple of years that you think most others may have missed?

One of the things we're dealing with right now in the financial services industry in general is how we acquire new customers. The unique business model that Block has set up is this whole concept of cross-selling existing customers. It's something that the rest of the financial services world is trying to do. The problem is that most of those other businesses have to go out and acquire new customers to cross-sell them other products and services.

In our business model, we inherently have -- pick a number -- twenty million customers across our various lines of business with whom have the opportunity to efficiently cross-sell other products and services. So, right now, in financial services sector, I think we have a fairly unique model in terms of our ability to cross-sell.

What are you most proud of in terms of the marketing of H&R Block?

The sheer volume of innovation that's happened over the past two years is what I'm most proud of. We've progressed from essentially a one-dimensional marketing program to a multi-dimensional, multi-channel, multi-partnership with new businesses, new promotions, new partnerships, and new products and services.

The sheer volume of change that's happened in two years is really quite extraordinary. Ultimately it comes down to effectively building our sales overnight and our brand over time.

Given that so much new is happening here, no two days are the same, which is great.